3 Ways to Wring at Least Some ROI From Failure

“We have aggressive growth targets. We need more innovation to get there. But we can't afford to fail.”

Sound familiar? This came from a recent conversation with a senior executive at a large global enterprise. He’s a smart and successful guy. But we believe he has this fundamentally backwards – both for himself and his organization.

In fact, failure -- the other "F word” -- is always an option. It’s how leaders engage with it and manage it that determines whether they and their organizations reap the unique insights failure offers. After all, failure is reality’s way of telling you what you don't yet know, but need to if you want to succeed.

You can turn failure from a regrettable event into a strategic resource to drive your company’s growth, innovation and employee engagement? Here are three suggestions:

1. Start with reality.

If you want to drive real innovation, recognize that failure will undoubtedly happen. Research firm AccuPoll reports that up to 95 percent of new products fail. Bloomberg says 80 percent of startups crash and burn in their first 18 months. Even half of VC-funded startups never return their investors’ money. Failure happens all the time. It’s like gravity – a pervasive fact and force of life. Better to respect and use it than try to defy or deny it.

You need to balance your legitimate aspirations for success with an honest recognition of the inherent fallibility of your organization and yourself. After all, we learned to fly only after we understood how to deal with gravity.

Our friend and colleague Guy Kawasaki -- startup guru, technology evangelist, and author -- nailed this point in a recent discussion we had with him: “I try to avoid failure at all costs, knowing it’s going to happen. But I view failure as necessary to attain real innovation. If you want to innovate, you have to take chances. If you take chances, you will sometimes fail.”

2. Respect and address the power of fear of failure.

Failure stings. It has a long half-life. The memory of past failures exacerbates our fear of future ones, leaving many stuck in the “static quo” of business as usual. In fact, memory and fear are failure’s force multipliers, and can easily lead to a “trial and terror” culture.

You need to acknowledge and candidly confront both, first by ensuring that you fairly treat those involved in good faith failures. People are watching whether the price of even earnest, best efforts, failures is ridicule, exile or loss of a job. If so, don't expect many volunteers the next time you want your people to step into an innovation agenda.

This is not about celebrating failure, or tolerating it if it's the result of carelessness, incompetence or bad will. Think of failure as an experiment. After all, you didn't embark on that failed product launch or new project expecting it not to work. You’ve already paid for it, so you might as well get the benefit of the lessons it holds. Treat the results like a scientist would, as hints about what might work better next time.

3. After failure happens (and it will), ask the right questions in the right order.

When there is a failure, what’s the first question you pose? Before asking “Who’s responsible?” start with these questions instead:

What just happened?

Why did it happen?

How can we learn from this?

This helps establish an environment where fundamental learning can take place. You might also provide the chance for those involved in this failure to apply these insights and lessons on the next initiative. After all, these team members are most familiar with what just happened and stand to gain the most from a future success.

Failure is too often a taboo topic in organizations. That encourages people to hide it, delay dealing with it or even deny it happened. Liberating “the other ‘F’ word” as the strategic asset it can be requires you to get comfortable talking about it openly so you can put it to work. The best companies get that. Their leaders know that growth requires innovation, innovation involves the likelihood of failure and treating failures fairly and honestly forges the kind of trust that unlocks genuine employee engagement with the agenda at hand.

Mark Coopersmith & John Danner

Mark Coopersmith and John Danner teach at the the Haas Business School, University of California Berkeley and have co-authored The Other “F” Word: How Smart Leaders, Teams, and Entrepreneurs Put Failure To Work.

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